In an interview with Gary Shilling, Heesun Wee of Tech Ticker states that Shilling believes deflation is inevitable because of technological advances boosting productivity, globalization and weak demand for U.S. consumer goods.  He suggests these factors could lead to higher inventories and cut about 1.5% off real U.S. GDP growth each year.

If this is the case, you don’t have to run for the hills, as there are ways to hedge deflation with ETFs.  A common place to look is at high-dividend paying investments, such as utilities, which can be accessed through the Vanguard Utilities ETF (VPU), up 5.1% year-to-date (More reasons to look at utilities).

Another good sector to consider is health care. (More reasons health care is appealing).  This can be played through the iShares Dow Jones U.S. Healthcare Providers (NYSEArca: IHF), which is up 28.3% year-to-date.

For more stories on health care, visit our health care category.

Consumer staples are also an option to hedge deflation. The unemployment rate is at a 26-year high, which means that there are still millions of people feeling the pinch. When they shop, they’re looking for what they need, not what they want. Consumer Staples Select Sector SPDR (NYSEArca: XLP) is up 15.4% year-to-date.

If deflation does become a factor, the dollar should begin an uptrend. If this happens, a potential play could be the PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP), which is down 9.4% year-to-date.

Kevin Grewal contributed to this article.

All three major indexes – the Dow Jones Industrial Average, the S&P 500 and the Nasdaq – have hit new intraday highs for 2009. The move was sparked by growth in Japan, a rally in energy and a positive report from the retail sector. Federal Reserve Chairman Ben Bernanke also spoke this morning to say that the central bank would monitor the value of the dollar as they keep rates at record lows. (Is it time to stick a fork in the dollar?). The SPDRs (NYSEArca: SPY) are trading up about 1.5% this morning.

October retail sales made a surprise 1.4% gain on the strength of auto sales, reports Martin Crutsinger for the Associated Press. While the report is just what the markets needed after dismal September figures, analysts are still concerned about consumer spending in general. After all, unemployment is still sky-high, incomes are stagnating and credit remains constricted. Consumer Staples Select Sector SPDR (NYSEArca: XLP) is up about 1% this morning.

UPS (NYSE: UPS) is projecting that it will move about 22 million packages this year on its busiest day, Dec. 21. The volume is slightly higher than what it was in 2008. The number will match the previous record forecast, which was set in 2007, reports Mary Jane Credeur for Bloomberg. iShares Dow Jones Transportation Average (NYSEArca: IYT) is up about 2.5% this morning. (For more stories on transportation, visit our category).

]]> http://www.etftrends.com/2009/11/midday-market-update-indexes-hit-intraday-highs.html/feed/ 0 http://www.etftrends.com/2009/11/how-name-brands-are-boosting-consumer-staples-etfs.html http://www.etftrends.com/2009/11/how-name-brands-are-boosting-consumer-staples-etfs.html#comments Mon, 02 Nov 2009 22:00:26 +0000 Tom Lydon http://www.etftrends.com/?p=19975 Retailers everywhere are locked in a battle for consumer dollars, and the fight may be most heated in the consumer staples sector as shoppers go generic. As brand names fight back, exchange traded funds (ETFs) can win.

The multibillion dollar consumer staples companies are slowly bringing back their customers, but the ways in which they lured them differ. How did they get consumers to pay a little more to get Colgate toothpaste, Kellogg’s Frosted Flakes and Gillette Fusion shavers, rather than the store-brands that were preferred a few months ago? (The allure of generic).

Dan Sewell and Sarak Skidmore for the Associated Press report that name-brand products have been battling to keep shoppers from trading down to store brands to save money.

• Procter & Gamble (NYSE: PG) cut prices and rolled out cheaper versions of some products.
• Colgate-Palmolive (NYSE: CL) took advantage of lower advertising rates to deliver the message that its products give more bank for their buck.
• Kellogg (NYSE: K) also put money toward marketing. (Brand names fight back).

Consumer spending is perhaps the single strongest driver of the economy, accounting for about 70% of the economy by federal measures. The sector remains weak and continued struggles in the job market could undermine a full recovery.

For more stories about consumer staples, visit our consumer staples category.

• Vanguard Consumer Staples (NYSEArca: VDC): up 11.9% year-to-date; Procter & Gamble 13.4%; Colgate Palmolive Co. 3.4%; Kellogg 1.2%

• Consumer Staples Sector SPDR (NYSEArca: XLP): up 10.4% year-to-date; Procter & Gamble 16%; Colgate-Palmolive 3.9%; Kellogg 1.5%

General Mills (NYSE: GIS) and ConAgra (NYSE: CAG) both reported higher-than-expected quarterly profits, thanks to falling commodity prices. Del Monte Foods (NYSE: DLM) reported a fiscal first-quarter profit and raised its target for the year, Kellogg (NYSE: K) announced that its full-year earnings should be at the high end of its goal.

It’s taking less money now for food companies to buy what is needed to make cereals, frozen vegetables and other products. Jeremy Hobson for MarketPlace reports that this is why food companies appear to be doing better than anticipated, especially in this market climate.

In addition to falling commodity prices, there are two other factors at play in the higher earnings of these companies:

• More consumers are cooking at home and are seeking out the products of traditional name brands to put food on the table.
• When commodity prices were high, this was passed onto the consumer, and now that commodity markets are no longer inflated, the price has remained the same, hence the profit margin, which equals healthier earnings.

• PowerShares Dynamic Food & Beverage (NYSEArca: PBJ): up 6.9% year-to-date; General Mills, 5.5%; Kraft, 5.1%

• Consumer Staples Select Sector SPDR (NYSEArca: XLP): up 7.4% year-to-date; General Mills, 2.2%; ConAgra Foods, 1.1%; Kraft, 4%

For more stories about food and beverage, visit our food and beverage category.

Kraft Foods (NYSE: KFT) kicked things off by bidding for Cadbury (NYSE: CBY), which declined the offer. Now other names could be lining up, including Hershey (NYSE: HSY), Pepsi (NYSE: PEP), Nestle and Mars. Don Dion for The Street reports that several types of ETFs, from food to consumer staples, can provide exposure and give investors the opportunity to capitalize on this battle.

• PowerShares Dynamic Foods (NYSEArca: PBJ): up 7.3% year-to-date; holds large, top consumer goods companies; Pepsi is 4.2%

• Consumer Staples SPDR (NYSEArca: XLP): up 7.3% year-to-date; highly concentrated holdings and is the largest ETF in the group; with 40 holdings, 66% of assets are given to top 10 companies; Kraft is 4%; Pepsi is 4.3%

• Vanguard Consumer (NYSEArca: VDC): up 9.7% year-to-date; holds 110 companies and tracks closely to XLP; Pepsi is 6.7%; Kraft is 3.5%

• iShares Consumer Goods (NYSEArca: IYK): up 14.3% year-to-date; IYK’s holdings include large, mature firms that offer stable returns, but does not offer any retail exposure that the others do; has a higher expense ratio of 0.48%; Pepsi is 8.8%; Kraft is 3.5%

The bidding over Cadbury could drag on for months, and the attention that it could draw to the sector make these funds interesting buys in the meantime.

For more stories about consumer staples, visit our consumer staples category.

Food producers were usually threatened only by rising commodity costs, which was usually passed down to the consumer. Nowadays, though, consumers are increasingly turning to private labels and store brands to cut down on costs, which could deliver a sucker-punch to the consumer staples name brands, Mike Pienciak for The Motley Fool says.

Even taste tests have confirmed that there’s little difference between the two. With experts sampling foods across 29 categories, blind taste tests revealed that store-brand foods matched or bested their national brand competitors in 23 of the 29 face-offs.

Store-brand foods included in the study sell at an average 27% discount to their name-brand competition, and the consumer is calling the shots. In response, Proctor & Gamble (NYSE: PG) is promoting a price cut up to 10% off their consumer products portfolio, hoping to lure customers back.

Anjali Cordeiro for The Wall Street Journal reports that P&G executives said the company is likely to return to organic sales growth in its second quarter, which ends in December. For the second quarter, P&G expects organic sales growth of 1% to 4%.

Pricing efforts, a revival in sales and measure to boost market share are all being utilized by P&G to appeal to consumers and give the competition a run for their money.

Also look for ETFs that hold stores with strong generic brands and private labels, such as Wal-Mart (NYSE: WMT) and Kroger (NYSE: KR).

• Consumer Staples SPDR (NYSEArca:XLP): up 7.1% year-to-date

• PowerShares Dynamic Consumer Staples (NYSEArca: PSL): up 14.8% year-to-date

For more stories about consumer staples, visit our consumer staples category.

The stock market cycle typically runs ahead of the economic cycle and in the markets, sectors typically gain ground at uneven paces.  Over this past uptrend, some sectors are performing as one would expect. Others, such as industrials and metals, are surprising investors. Those areas tend to recover in the latter stages, states Mitchell Corwin of Morningstar.

Some investors think that the markets are overextended. If you’re one of them, here are four sectors that Corwin suggests you keep an eye on:

• Exploration and production of oil and natural gas, which can be accessed through the iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO). It’s up 15.9% year-to-date. A surging economy could propel the fund, but Corwin also feels that demand from growing economies could push oil prices even further.

• Health care, which one can grab exposure to through the iShares S&P Global Healthcare (IXJ). It’s up 4.5% year-to-date. The fund is a portfolio of some of the world’s best health care companies. Pharmaceuticals are a major portion of IXJ.

• Medical equipment manufacturers and producers can be found through the utilization of the iShares Dow Jones U.S. Medical Devices (IHI) which is up 24.3% year-to-date. Demand for medical equipment tends to be steady through economic cycles. There’s also a population here that’s aging, while overseas populations are booming.

• Consumer staples ETFs hold companies which offer goods that are viewed as essential. These companies can be accessed through the Consumer Staples Select Sector SPDR (XLP) which is up 4.5% year-to-date. One caution in this area is that consumers are increasingly shifting to generic brands, which could hurt name-brand staples.

Forecasts and predictions are just that. Always have a strategy before getting into a fund, such as a 200-day moving average strategy. You can read more about the strategy in The ETF Trend Following Playbook, as well.

For more stories on consumer staples, visit our consumer staples category.

Kevin Grewal contributed to this article.

Shoppers might not be able to afford Rolex watches and champagne during a downturn, the theory ran, but everyone still needs staples such as soap and toilet paper, explains the Economist.

So why have sales fallen in this category? One big factor is growing competition from stores’ own brands, or “private labels.” Private-label goods tend to cost about a quarter less than branded ones, and so they appeal to penny-pinching consumers. The rising commodity prices have also put a damper on the sector at large, as consumers have simply redefined what’s really a “staple” for them.

Analysts are forecasting the change to private-labels is a trend that could stick, whether the recession is here or not. The quality of private-label goods has improved, making it harder for consumers to discern any difference between a store’s brand and a more expensive rival.

How can you play the shift from name-brand to generic? Look for ETFs that hold stores with private labels, such as Target (TGT), Wal-Mart (WMT) and CVS (CVS).

• Consumer Staples Select SPDR (XLP): up 5.6% year-to-date; holds Wal-Mart, 11.7%; CVS, 5.1%

• Vanguard Consumer Staples (VDC): up 7.8% year-to-date; holds Wal-Mart, 11.2%; CVS, 4.2%

For more stories about retail, visit our retail category.

The rapid recovery in stock prices has consumers and U.S. companies hopeful that a “wealthy” feeling will return and Americans will once again spend, spend, spend. One economist points out that housing is still showing weakness, meaning that it could be awhile before consumers are in a real mood to shop with confidence.

Economist suggest that overall, the economy is recovering and that a bottom in housing may have already been touched.

One thing is for certain: it’s not as though Americans don’t want to shop.

Sandra M. Jones for The Chicago Tribune reports that there are increasing signs of pent-up demand. Consumers are tired of saving their pennies. One study found that one in four women are ready to treat themselves to a new outfit, a vacation, an evening on the town or something new for the home.

Despite that, many consumers still want a bargain if they are going to spend. Perhaps they’ll plan that vacation with Expedia (EXPE) to get a low price, and buy that new outfit at JC Penney (JCP). That could mean that some retail-oriented ETFs will continue to hold companies that have a bent toward value. However, some shoppers are still looking for luxury – investors who want to capitalize on the spending habits of the wealthy can do that with ETFs, too.

• SPDR S&P Retail (XRT): up 56% year-to-date

• Consumer Staples Select Sector SPDR (XLP): up 1.9% year-to-date

• Claymore/Robb Global Luxury Report (ROB): up 31.2% year-to-date

For more stories about retail, visit our retail category.

Consumer spending is a huge indicator of the health of the U.S. economy, so it is studied closely.

For the month of June, consumers were feeling secure enough to spend some money even as their incomes dropped, according to the Associated Press. June’s rise in spending came as the average income fell 1.3%, the largest decline in four years. Wages and salaries fell 0.4% in June from May, the eighth straight monthly drop. One theory suggests that the jump in spending came from government subsidies that drove up new car and home sales.

In July, that wasn’t the case, as retailers reported sluggish sales.

Karen Tally for The Wall Street Journal says that July’s decline is the 11th consecutive month in which comparable store sales declined. Even discount stores are anticipating a 6.1% drop in sales.

Consumers for the most part appear to be sticking with the necessities and hunting down values, making consumer staples ETFs appealing. Their top components are a mix of brands that provide staple items such as toothpaste and household cleaners (Colgate (CL), Procter & Gamble (PG)) as well as value-oriented retailers (CVS (CVS), Walgreen’s (WAG)).

• Consumer Staples Select Sector SPDR (XLP): up 3.7% year-to-date

• Vanguard Consumer Staples ETF (VDC): up 5.6% year-to-date

For more stories about consumer staples, visit our consumer staples category.